LLP registrations which mention certain professions such as CAs, CSs, CWAs which are governed and mentioned by special enactments/statutes, such special enactments/statutes need to facilitate the formation of an operating through LLPs. The Institute of Company Securities of India (ICSI) to regulate the members of the respective profession . Professionals that are ruled and mentioned by special statutes/enactments involves in Limited Liability Partnerships.
MENTIONS “PARTNER” UNDER THE LLP ACT:
Section 2(1)(q) of the LLP Act related with LLP means any person who becomes an LLP partner as per the LLP Agreement.
Any individual or corporate body may become an LLP partner.
Section 5(1) mentions that an individual cannot be capable of becoming a partner of LLP, if;
I, he has been found to be of unsound mind by a Court of competing for jurisdiction and finding is in force;
II, he is an undischarged solvent or
III, he has applied to be to make a formal judgment, not solvent and mentions pending application.
Being a body corporate or being an individual, may become an LLP partner as per agreement of LLP. The LLP Act purport is clearly fair and applicable to all kinds of LLP across the board.
LLP BY AND AMONGST CHARTERED ACCOUNTANTS:
The Chartered Accountant Act relevant provisions, 1949.
Member considered being in Practice.
Section 2(2) of the Chartered Accountant Act, 1949 provides and mentions that Institute members shall be considered “ to be in practice”, individually or in partnership in practice with chartered accountants, he, in remuneration consideration received or to be received.
He will engage in the practice of accountancy himself or
Perform service which mentions and includes verification of financial transactions or auditing or transactions financially, books, records or accounts or the preparation, certification of financial accounting or verification and related statements or holds himself out as an accountant to the public; or
Renders professional assistance in or services in or about matters of principle or related to accounting methods details or the presentation, the recording or certification of financial facts or data etc.
Renders such as other services, in the Council opinion, are or may be rendered by a chartered accountant who is in practice: and the words “ to be in practice” with their variations grammatical and accordingly cognate expressions shall be construed.
Companies not to practice as Chartered Accountants.
Section 25 of the Chartered Accountants Act, 1949 excludes companies from mentioning or indulging in the accountancy profession. Section 25(1) of the Chartered Accountants Act provides that no company, mentions whether incorporated in India or anywhere as a Chartered accountant can practice.
The person who is not qualified should not sign documents.
Section 26(1) of the Chartered Accountants Act mentions and provides that none of the persons other than Institute members shall sign any document on the chartered accountant behalf in practice or such chartered accountants firm in his or its professional capacity.
Comments: The provisions above suggests and mentions that presently either a Chartered Accountant in practice or such chartered accountants firm and as such are allowed to sign any document in his/its professional capacity, a body corporate, company is debarred as Chartered Accountants from practicing or mentioning.
LLP as a Chartered Accountant—Whether ICAI to Form LLPs as its members or to become an LLP Partners.
As per LLP act is that of a body corporate. As per this aspect, an LLP may not be allowed Chartered Accountants to practice. In order to include this, the ICAI central council approval was not in place until July 2011 to allow to form its members, and through LLP structure practice.
MCA CIRCULAR No. 10/2011 dated 4 April 2011.
For issue clarification, the MCA has issued Circular No. 10/2011 dated April 4, 2011, on the word interpretation “Partnership” for Chartered Accountant Act 1949 purpose, Works and Cost Accountants Act, 1959 and Companies Secretaries Act 1980.
The Acts, the three professional Institutes governing, which defines and mentions section 2, members who are considered to be in practice. In the Chartered Accountants, case and Accountant Work and Cost such persons must be the same Institute member. Whereas in the Company Secretaries case it is provided that partnership members may form with other recognized professions members mentioned under section 2(2) of the Company Secretariat Act 1980 for rendering services purpose.
MCA has examined the matter of permitting the member of ICWAI, ICAI, and ICSI. The Circular above explains though the LLPs are bodies corporate under section 3(i) of the LLP Act, LLPs are basically partnerships the fact may be seen from the definition in section 2(i)(n).
Under this Act, “Limited Liability Partnerships is a partnership registered and formed.
Section 2(i)(q) mention a partner as “ any person who becomes limited liability partnership partner in accordance with the agreement of the Limited Liability Partnership.
These professionals were passed at a time governing the act when limited liability partnership does not exist. It is clear from LLP Act definitions that such entities are also partnerships and their partners are also members. In the context of section 2 of the Act the professional Institutes governs, this is also not contexted repugnant interpretation. Accordingly, it is clarified that the words “partnership” wherever occurring in the Chartered Accountant act 1949, the Works Accountant Act 1959, the Cost and the Companies Secretariat Act 1980 shall be construed mutandis mutatis including those LLPs where all the other persons as natural persons. Accordingly, the word “partner” shall also be construed. This clarification can apply to these three Acts only and not to any other enactment where the word “partnership” occurs.
Therefore the MCA circular above purports to include the LLPs within the “firm” meaning in the Chartered Accountant Act as mentioned. In other words, for the Chartered Accountant Act purposes, and as “body corporate” an LLP shall not be declared or mentioned.
The decision of ICAI’s to allow to form its members, and through practice, LLP firms
As per the news report dated 19 July 2011, the ICAI permitted audit firms to convert into LLP firms.
Since the LLP enactment Act came into force on 31 March 2009, none of the LLPs were registered/formed by Chartered Accountant practices pending the council of ICAI decision to allow to form its members and through LLPs operated and mentioned.
In the Central Council of ICAI meeting held in July 2011, the proposal which permitted firms to convert into an approved LLP. The same rules would be notified in due course by the ICAI.
And at the same time, it has been decided to make sure that one name is restricted by one entity for use. As such, a firm will have to attach to a name like XYZ instead of setting up several firms with names such as XYZ Delhi, XYZ India, and XYZ Mumbai. This decision has the great effect on big firms, operations are carried out in India’s different parts through different firm names unpaid to the limitation that partnership firm has the best 20 partners. In the LLP’s case, the maximum number of partners limitation is not there.
An LLP gives the benefits of Limited Liability business while permitting its members for organizing their internal structure flexibility as a partnership. With the LLP structure, the LLP firms partners would be able to limit their liability in civil disputes case.
Further, would be permitted to convert the existing CA firms and they maintain their seniority also. Firms which are new need to check the availability of names from the LLPs registrar and with the ICAI register.
With this Central Council of the ICAI decision, henceforth the ICAI members would be able to form firms of LLP as Chartered Accountant practice. Such an LLP may be called “Chartered Accountants” LLP.
